Correlation Between Bank of Nova Scotia and IShares Govt

Can any of the company-specific risk be diversified away by investing in both Bank of Nova Scotia and IShares Govt at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bank of Nova Scotia and IShares Govt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Bank of and iShares Govt Bond, you can compare the effects of market volatilities on Bank of Nova Scotia and IShares Govt and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bank of Nova Scotia with a short position of IShares Govt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Nova Scotia and IShares Govt.

Diversification Opportunities for Bank of Nova Scotia and IShares Govt

0.48

Correlation Coefficient

Bank of Nova Scotia  IShares Govt

Very weak diversification

The 3 months correlation between Bank and IShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Bank of and iShares Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Govt Bond and Bank of Nova Scotia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Bank of are associated (or correlated) with IShares Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Govt Bond has no effect on the direction of Bank of Nova Scotia i.e., Bank of Nova Scotia and IShares Govt go up and down completely randomly.

Pair Corralation between Bank of Nova Scotia and IShares Govt

Assuming the 90 days horizon The Bank of is expected to generate 2.39 times more return on investment than IShares Govt. However, Bank of Nova Scotia is 2.39 times more volatile than iShares Govt Bond. It trades about 0.06 of its potential returns per unit of risk. iShares Govt Bond is currently generating about 0.03 per unit of risk. If you would invest  3,898  in The Bank of on October 22, 2024 and sell it today you would earn a total of  1,075  from holding The Bank of or generate 27.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Bank of  vs.  iShares Govt Bond

Bank of Nova Scotia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Bank of Nova Scotia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares Govt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of Nova Scotia and IShares Govt

The main advantage of trading using opposite Bank of Nova Scotia and IShares Govt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Nova Scotia position performs unexpectedly, IShares Govt can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Govt will offset losses from the drop in IShares Govt's long position.

The idea behind The Bank of and iShares Govt Bond pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.